Global community echoes SME funding woes and launches a finance competition with focus on innovative solutions for the world
In the last DARE issue, we had covered how SMEs are often too small to attract commercial bank or investor interest but too large to benefit from microfinance products. In fact,
only an estimated 20 percent of small firms in low-income countries have access to credit. To counter the same issue on a global level, The Group of 20 and Ashoka’s Changemakers, with support from the Rockefeller Foundation, have launched an online competition to find the best models worldwide for public-private partnerships that catalyze finance for SMEs. The G-20 SME Finance Challenge is the first ever competition launched by the G-20 and is a unique financial inclusion effort aimed at giving small entrepreneurs a chance to grow their businesses.
At the Pittsburgh Summit, the G-20 had created the Financial Inclusion Experts Group (FIEG) to expand access to financial services, including credit, to the poor. The United States, Canada, and Korea co-chair the FIEG. At the G-20 Business Summit (B-20), Canadian Prime Minister Stephen Harper announced the competition and pledged $20m from Canada to scale up the winning solutions. “Small and medium enterprises are the single largest contributor to employment and job creation, in Canada and around the world,” said Prime Minister Harper.
To implement the winning proposals from development banks and interested bilateral donors, the G-20 has committed to mobilizing the public share of the funding needed. Various development finance institutions like IFC, the World Bank, the Asian Development Bank, the Inter-American Development Bank Group, the African Development Bank, OPIC and the European Bank for Reconstruction and Development have indicated their support for implementing scalable and sustainable proposals in partnership with the private sector.
Through the G-20 SME Challenge, the private financial institutions, investors, companies, foundations and civil society organizations have been asked to identify path-breaking models that will make public programs more effective in obtaining private finance. “By identifying the best financial solutions to support SMEs, the G-20 is playing a critical role in the global fight to create jobs and reduce poverty,” said Rockefeller president Judith Rodin.
|The G-20 and Ashoka’s Changemakers invite entries before August 25, 2010 at www.changemakers.com/SME-Finance.
Details on guidelines and criteria for the proposals can be found on the aforementioned website.
Those proposals that best meet the criteria of innovation, leverage, social and economic impact, sustainability, and soundness will be the winners of the Challenge. Entries shall be judged by a panel of five independent experts and three G-20 representatives. Up to 15 entries will be selected as winners representing all regions (Africa, East Asia and the Pacific, Europe and Central Asia, Latin America and the Caribbean, Middle East and North Africa, and South Asia) . They will be invited to the November 2010 G-20 Summit in Seoul, Korea to be recognized for their innovative ideas, and to enable them access a pool of public finance mobilized by the G-20.
“We are expecting a lot of participation from India. This competition is being seen as a major step forward in taking effective solutions to the promotion and support of SME segments globally,” says Manoj Chandran, Director – Marketing, Ashoka India.
Aftwerwards, the winners will then be connected with donors and investors at an SME conference in Germany. The form of funding available will depend upon the requirements of winning entries and may include grants for technical assistance or capacity-building for financial institutions, risk sharing or first-loss capital, mezzanine capital, or investment capital.
“Ashoka attracts a marketplace for innovation,” said Diana Wells, Ashoka’s President. “We believe that there are a host of unknown brilliant ideas that are providing critical financial support to the best small companies that are changing the world. The G-20 and Ashoka’s Changemakers are committed to finding them and bringing them to the world’s attention.” If there are more of such competitions which raise funding for SMEs solving social problems, we can surely hope that the problems of the world may come to an end.
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